Gov’t allots P20B to buy 2M barrels of diesel
The Philippine government is allotting P20 billion to purchase up to 2 million barrels of diesel meant to bolster the local stockpile as the Middle East war continues to disrupt global trade flows.
In a briefing on Tuesday, Energy Secretary Sharon Garin said the Philippine National Oil Co. (PNOC) will focus on the acquisition, with the new diesel supply offered to local oil companies.
According to Garin, the PNOC has an unused budget that the government can tap to buy the fuel. The Department of Energy (DOE) is also exploring other funding sources.
Energy officials earlier said the additional supply would be sold to fuel retailers at cost.
“It’s very expensive… We also sell the buffer, so we can use the money to buy more. Hopefully it stays at that amount because we’re not in the business for retail of gas or to sell gas,” Garin told reporters.
Supply source, status
Currently, the government has been negotiating with eight possible suppliers. The first 400,000 barrels would be sourced from countries in Southeast Asia, while the other 600,000 barrels could come from producers outside the region.
The transaction for the 400,000 barrels was already “finished,” Garin said. They hope to secure 600,000 more barrels this week. It was not clear when the supply would arrive, but officials previously said it would take just a week for orders coming from neighboring countries.
She did not identify the countries, but Garin mentioned Japan, which has been “very accommodating” to the Philippines’ requests, such as making sure the long-term contracts are honored.
Garin said they were also asking Japan for more supplies.
If the orders materialize, the local market will have an additional 10 days’ worth of diesel reserves.
The energy chief said the Philippines’ supply is “still sufficient” for up to 40 to 45 days, or until early May. She assured the public that the supply is “not in an alarming state.”
Aside from the government’s acquisition plan, Garin said oil firms have been placing orders from their suppliers.
However, consumers continue to suffer from hefty fuel prices, with diesel prices soaring to nearly P150 a liter this week.
Garin, however, said the increases were not as sharp as the previous two weeks.
Worst-case scenario
Appearing before the Senate proactive response and oversight for timely and effective crisis strategy (Protect) committee also on Tuesday, Garin said when asked what could be the worst-case scenario facing the country: “The worst-case scenario is we run dry—this country runs dry.”
But she said the government and oil companies have a month and a half to secure excess inventory.
“The good news is we have about a month or a month and a half to prepare for this. We are looking for other suppliers, and we’re talking to other countries. We have [contracts] in the US that are new, and India,” Garin said.
Later in the hearing, Garin also mentioned that the DOE is also considering buying from Russian oil suppliers, although there are several complications.
“Supply basically is not the main issue, it’s how much you’re willing to pay for the supply. Kaya may premium ngayon kung sino bebentahan (So now there’s a premium on who will get the supply),” she said.
When Sen. Sherwin Gatchalian, the panel chair, asked Garin of the likelihood that the country will run out of stock, the DOE chief said: “I do believe that that will not happen.”
Still, she pointed out that if the tensions in the Middle East continue, oil prices will be “really high” and the government must be “willing to pay.”
Based on DOE records, an eight-day stock or about 1 million barrels costs P12 billion.
Energy-sharing mechanism
Earlier in March, it was reported that to bolster local supply, the Philippine government is targeting to acquire at least 1 million barrels of diesel from South Korea, Japan, Singapore, Malaysia and Indonesia.
If approved, the PNOC will use government funds to pursue the procurement.
“It would be advantageous because PNOC would likely sell only at cost. PNOC would not make a profit; it would simply recover its expenses, and the fuel would still be distributed by the domestic oil companies that purchase it,” DOE Oil Industry Management Bureau director Rino Abad said earlier.
On March 13, it was announced that the Association of Southeast Asian Nations (Asean), which the Philippines currently chairs, would expedite the enforcement of an energy-sharing mechanism that will allow member states to support each other’s oil and gas needs during supply disruptions.
In a press briefing following the 32nd Asean Economic Ministers’ (AEM) Retreat in Taguig City, Trade Undersecretary Allan Gepty said the AEMs agreed to hasten the completion of the Asean Petroleum Security Agreement (Apsa) ahead of this year’s summit in May.
Under Apsa, a member could give a distress notice to the secretariat of the Asean Council on Petroleum of the occurrence of a “critical shortage” in its petroleum supply due to an emergency, after implementing short-term measures to reduce demand of its petroleum use.
Sen. Francis Escudero, in a statement, urged the government to use the Philippines’ chairship of the Asean Summit this year to push for Apsa.
“By accelerating Apsa’s completion, Asean can establish its own mechanism for emergency fuel supply, triggered when a member state experiences a shortfall of at least 10 percent,” Escudero said.
Coal for power
Meanwhile, Garin said the agency had received assurance of a steady supply of coal from its top supplier, Indonesia. This, as President Marcos earlier highlighted the need to ensure enough coal importation to soften the impact of soaring oil prices on electricity rates.
“We have assurance from them and we’re good partners with Indonesia. We have a long-standing trade relationship with Indonesia,” she said.
This is despite reports that Indonesia might limit or restrict exports.
“It’s more of a question of if they will adjust their price, which we are observing as of now,” Garin added.
Coal keeps its dominance in the power generation mix in the Philippines, as it gives the lowest price yet delivers the most stable operation.
If the agency ensures no issues in coal supply, Garin said it would help reduce the electricity rate hike caused by the conflict in the Middle East.
“We’re targeting a reduction of about P2 in the projected increase,” she said.
Not only are fuel prices on the rise, but power officials have already warned about potential increases in electricity starting next month. Power spot prices, for instance, are expected to climb by up to P4 per kilowatt hour. —WITH A REPORT FROM INQUIRER RESEARCH
******
Get real-time news updates: inqnews.net/inqviber
